Position

• ICBA supports legislation that would replace single-director governance of the Consumer Financial Protection Bureau (CFPB) with a five-member commission. Prudential banking regulators should actively participate in the consumer protection rule-writing process and the CFPB’s governance.

• ICBA supports granting the CFPB additional statutory authority to exempt or tier regulatory requirements for community banks and/or community bank products and services where appropriate.

• ICBA supports a balanced regulatory system in which all firms that offer financial products and services, including non-banks, are subject to meaningful supervision, examination and enforcement. ICBA strongly urges the CFPB to concentrate its efforts and resources on greater supervision of irresponsible actors that are not regularly examined.
• Banks with assets of $50 billion or less should be exempt from examination and enforcement by the CFPB and instead be examined and supervised by their prudential regulators for compliance with consumer protection regulations.
• ICBA urges the CFPB to ensure that adequate small entity public input is sought and considered by enhancing the Small Business Regulatory Enforcement Fairness Act (SBREFA) process to allow additional time for small entity representatives to fully discharge their duties on the panel and by streamlining the notice of proposed rulemaking and final processes.
• ICBA encourages the CFPB Office of Innovation’s efforts to create balanced and flexible regulation that promotes innovation.

Background

Strengthened Participatory Governance and Rulemaking. Replacing single-director governance with a five-member commission would allow for diverse views and expertise on issues before the CFPB and build in a system of checks and balances. A commission would promote measured and non-partisan agency decision making which would more likely result in balanced, high-quality rules and effective consumer protection.

Community Bank Exemptions. While the Dodd-Frank Act allows the CFPB to exempt smaller financial institutions – including community banks – from its rules, it has been reticent to use this authority. Consequently, community banks which did not cause the problems the CFPB seeks to address are too often forced to comply with rules intended to target bad behavior by larger financial services providers.

Clearer statutory direction would help alleviate this burden. Arbitrary requirements that do not take into account the relationship-based community banking model reduce consumer choice and end up hurting the very consumers they are meant to protect. Additionally, regulation should not be overly prescriptive and deprive consumers of their ability to make financial services decisions.

Better Risk Targeting of Exam Resources. Raising the exemption level for CFPB examination and enforcement from $10 billion in assets to $50 billion would enhance consumer protection by allowing the CFPB to concentrate on the greatest threat to consumers, megabanks and non-bank financial services providers. Banks of less than $50 billion in assets would continue to be examined for compliance with CFPB rules by their prudential regulators. Community bank supervision is more balanced and effective when a single regulator examines for both safety and soundness and consumer protection.

Office of Innovation. ICBA urges the CFPB’s Office of Innovation to help strike the proper balance of setting protocols and procedure while still leaving flexibility that facilitates innovation in the markets for consumer financial products and services. The CFPB’s proposed revisions to its Trial Disclosure and No Action Letter Programs will facilitate community bank innovation, designed to better help the consumer.

Staff Contacts:  Rhonda Thomas-Whitley and Michael Emancipator